A chargeback occurs when a customer disputes a previously-made transaction, whether due to a stolen credit card or an error on the merchant’s part. For a small business accepting credit cards on a daily basis, chargebacks are unfortunately inevitable and can lead to hefty fees. However, there are precautions that you can take in order to avoid chargebacks.
- 1. Do not complete transactions with declined authorization requests. If a customer gives you a credit card that has been declined, ask for another method of payment, such as a check, cash or debit card.
- 2. Deliver products and services before charging the customer. Customers may dispute charges made on their card before they received their merchandise. Wait to receive proof of delivery before charging the customer.
- 3. Make sure your merchant account payment gateway has safeguards that check for duplicate charges. This helps to avoid chargebacks that relate to the same transaction made twice.
- 4. Give your customers access to all the information they need regarding your refund, return, exchange and cancellation policies. For online sales and payments, send customers an e-mail with their receipt and payment information confirming how much was charged to their account.
- 5. Communication is crucial. Respond to cancellations quickly, notify customers of delivery delays, and make sure your customers can speak with you or your staff if they have a problem. Many chargebacks occur due to the acceptance of stolen credit cards, for which businesses are fully accountable.
Bottom line: Be smart and be careful!